As promised, the the most sweeping rewrite of the tax code in more than 30 years, commonly known as The Tax Cuts and Jobs Act, arrived on President Donald Trump’s desk before Christmas and on the 22nd of December, he signed it into law. We have all heard that this is a major overhaul that may limit or end many deductions we currently use. How much is really changing though? And how will it affect us as medical providers?
The individual mandate repeal and possible cuts to Medicare spending are the most high-profile impacts on healthcare, but there are other effects you may not be aware of. There are provisions in the bill as it stands that affect hospital construction projects, medical students, and nonprofit health organizations. Some of the impacts are relatively minimal while others could have deep and long-lasting effects.
Without a doubt, the repeal of the individual mandate and the potential cuts in Medicare spending are worthy of the attention they are receiving. Experts have stated that the mandate is necessary since it forces healthy consumers into the insurance pool of the ACA marketplaces, which means those healthier, less costly participants help balance out the less healthy, more expensive ones.
The repeal of the mandate may prompt insurance firms to drop out of the ACA marketplaces and premiums to increase. In early November, the Congressional Budget Office released a report that predicted the loss of the mandate could cause premiums to rise 10% and result in 13 million fewer people having health insurance by 2027.
There are no mentions of Medicare spending cuts in the bill. However, experts say the reductions in tax revenues under the bill could trigger a 2010 law that requires spending cuts in some federal programs if Congress passes legislation that creates a deficit.
While many healthcare industry groups are unhappy about the Republican tax cut bill, many primary-care physicians and dentists in independent practices have reason to celebrate. The bill reduces the personal income tax rate for owners of so called “pass-through entities” like partnerships and sole proprietorships, and also gives a smaller tax break to owners of “Subchapter S corporations”. This is good news, because most physician and dental practices are organized in this manner.
Healthcare professionals and other skilled service providers will only qualify for the new break if they earn no more than $415,000 a year for a married couple filing jointly, or $207,500 for a single filer. "That will help our primary-care physicians, but it won't be that great a help to the two-physician family or to specialists, whose incomes will be above that," said Tina Hogeman, chief financial officer at the Medical Group Management Association.
It is hoped that the lower tax rate will help independent physicians in small towns, some of whom may be their community's only healthcare provider, stay in business. In addition, the lower tax rate could help those small-town and rural physicians remain independent rather than selling their practices to a hospital system or other large organization.
At Emerald Coast Medical Association, we support our members in all areas of their work, not just the in patient care arena. Steve Riggs with Carr, Riggs, and Ingram financial advisors will be the keynote speaker at our March meeting, providing essential information about tax reform as it relates to your business. As tax season approaches, you need to be aware how it affects your practice, particularly with the many changes afoot. Accelerating expenses, cost of borrowing, and planning your turnover are all pieces to the puzzle. Join us to listen, learn, have lunch, and ask questions.